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Friday, January 16, 2004

Mergers and Acquisitions

I read on Allpar, probably the best source for Chrysler news out there, that Schremp, the German-Mercedes Benz installed head of Chrysler, was voted one of the worst managers of 2003 by Business Week. That made me think: Have any acquisitions gone well in the auto industry? Here's a list of the one's I came up with:

GM/Saab: After a decade of GM interest in this company, only VERY recently has the company begun to turn around, and only after largely compromising what it is Saab does. The 9-3 is the most un-Saab car ever made by Saab, and though I personally like the vehicle, it has little of the old Saab quirkiness in it. I expect this trend to continue, but I also expect the trend of Saab to improve, to continue. Grade C+--for compromising the brand, and only achieving success recently, after a failed decade.

GM/Fiat: So far, I haven't seen one good thing to come out of this partial acquisition for GM, except that Fiat might pull out of it, and it has convinced GM to stop buying failing European brands. They didn't get control of Ferrari, Fiat has not started selling Alfa Romeos in the US, and Fiat could at any time force GM to buy the remainder of the company at a cost of billions. GM would undoubtedly fight this in court, but even that would cost millions. Fortunately for GM, it looks like Fiat is getting out of the deal. It might make future development of Opel cars cheaper, but even that is years off and will cost billions in research.
Grade D--For no benefit to either company, except for serving as a warning to not acquire further in Europe. GM of course bought Daewoo recently, but I have high hopes for that acquisition.

GM/Suzuki--Suzuki has a strong presence in Japan, but not that strong, and GM has benefitted from the relationship with a line of small SUVs built on Suzuki platforms, for sale as Chevrolets. These SUVs aren't that popular however, and Suzuki continues to struggle in the only foreign market Japan finds success in: the U.S. Still Suzuki is not in danger of bankruptcy anytime soon like some other acquisitions. Grade C---This still might work out, and GM gets a toehold in the Japanese market. It's up to GM to make use of that toehold, the Chevy Cruze did abominably in Japan. Boost Suzuki, not Chevy in the JDM, Japanese are very brand conscious.

GM/Subaru/Fuji Industrial--This deal has gone well for GM, to a small extent. Subaru is a small company, but it is a successful small company, so that must bring GM some profit. The jury is still out on whether Subaru can help Saab with the Saab 9-2x; at the LA autoshow, NO ONE was looking at this car. Subaru does well in the US, but it can't afford more mistakes like the Baja. Grade B---Again, just because you own it, doesn't mean you can sit on it. GM should make more of an attempt to utilize Subaru. It's clear they don't know what to do with it, but won't sell it, because it makes money. They should use it to help their own line of small cars, like the Cobalt.

Daimler/Chrysler--Where to begin with this one? Sure, some might say, it's easy to beat on the injured, but realistically Mercedes has done a TERRIBLE job with Chrysler. Since the acquisition, there have been ZERO new car platforms for Chrysler. Not one. The only new models that have come about, were already in the pipeline. The first new platform will be the Chrysler Cordoba errr, I mean the Chrysler 300, and I am very skeptical this will sell. Chrysler has been trying for decades to get into the luxury business, and no one has fallen for it. Realistically, I think Mercedes was never wealthy enough to both buy Chrysler and fund the company's future. Chrysler was a larger company than Daimler, they were only bought out because their stock price was so low. It's probably too late to separate the two companies, as Kerkorian the disgruntled stockholder wishes to do, and separation would probably only hurt both dramatically. Grade C--We'll have to wait for what the future will bring, but so far Mercedes has only done what it knows how to do, which is make luxury cars. And Chrysler/Dodge is not a luxury car maker.

That's all for now, I'll go over some of the other mergers in the industry tomorrow...

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